As part of continuing efforts to combat dubious Employee Retention Credit (ERC) claims, the Internal Revenue Service is sending an initial round of more than 20,000 letters to taxpayers notifying them of disallowed ERC claims. IRS is disallowing claims to entities that did not exist or did not have paid employees during the period of eligibility to prevent improper ERC payments from being made to ineligible entities.

The letters are being sent as the IRS continues increased scrutiny of ERC claims in response to misleading marketing campaigns that have targeted small businesses and other organizations. The IRS mailing is the latest in an expanded compliance effort that includes a special withdrawal program for those with pending claims who realize they may have filed an inaccurate tax return. Later this month, a separate voluntary disclosure program will be unveiled allowing those who received questionable payments to come in and avoid future IRS action.

After an initial review this fall, the IRS determined that a large block of taxpayers did not meet basic criteria for the credit. Starting this week, taxpayers who are ineligible for the credit will begin receiving copies of Letter 105 C, Claim Disallowed.

This group of letters will cover taxpayers ineligible for the ERC either because their entity did not exist or did not have employees for the time period when the credit was claimed.

“With the aggressive marketing we saw with this credit, it’s not surprising that we’re seeing claims that clearly fall outside of the legal requirements,” said IRS Commissioner Danny Werfel. “The action we are taking today is part of an initial set of steps in our compliance work in this area, and more letters will be going out in the near future, including both disallowance letters and letters seeking the return of funds erroneously claimed and received.”

“As we continue our audit and criminal investigation work involving the Employee Retention Credits, we continue to urge people who submitted a claim to review the rules with a trusted tax professional. If they filed an inaccurate claim, we urge them to consider withdrawing their pending claim or use the upcoming disclosure program to repay improper refunds to avoid future action.”

Following concerns about aggressive ERC marketing from tax professionals and others, the IRS announced Sept. 14 a moratorium on processing new ERC claims through at least the end of 2023. The IRS noted that enhanced compliance reviews of existing claims submitted before the moratorium is critical to protect against fraud and also to protect businesses and organizations from facing penalties or interest payments stemming from bad claims pushed by promoters.

When properly claimed, the ERC is a refundable tax credit designed for businesses that continued paying employees during the COVID-19 pandemic while their business operations were either fully or partially suspended due to a government order or had a significant decline in gross receipts during the eligibility periods.

In July, the IRS said it was shifting its focus to review ERC claims for compliance concerns, including intensifying audit work and criminal investigations on promoters and businesses filing dubious claims. The IRS has hundreds of criminal cases being worked, and thousands of ERC claims have been referred for audit.

20,000 letters focus on two ERC problem areas

The mailing reflects just part of the ongoing IRS review of these claims. In this group, two categories of claims have been identified and are being disallowed:

• Entity not in existence during period of eligibility: The ERC applies to qualified wages for periods between March 13, 2020, and Dec. 31, 2021. Entities established after Dec. 31, 2021, are not entitled to the ERC under the law passed by Congress.

• There are no paid employees during the period of eligibility: The ERC is intended as a credit against qualified wages paid. Entities that did not pay any wages are not eligible for ERC.

The IRS respects taxpayer rights, and the disallowance letter will explain that a taxpayer that disagrees with the disallowance can respond with documentation that supports their eligibility or claim amount, or they can file an administrative appeal.

The disallowance letters that identify ineligible claims before they’re paid serve several purposes that help taxpayers and tax administration. They:

• Help ineligible taxpayers avoid audits, repayment, penalties and interest,
• Protect taxpayers by preventing an incorrect refund from going to an ERC promoter, and
• Save IRS resources by disallowing incorrect credits before they enter the audit process.

The IRS plans additional letters beyond the disallowance letters. Plans are also being finalized for a special voluntary disclosure program involving ERC claims that will be announced later this month.

The IRS is also continuing to review ERC claims and may request more information from taxpayers to support their ERC claim.

Source: IRS-2023-230, Dec. 6, 2023

To wrap up National Tax Security Awareness Week, the Internal Revenue Service and the Security Summit partners today reminded taxpayers and tax professionals to stay alert against emerging scams during the upcoming filing season and throughout the year.

With identity thieves constantly changing tactics to try to steal information from taxpayers and businesses, the Security Summit partners remind people to watch out for a variety of aggressive schemes that can surface on email, by text, over the phone or through the mail.

These threats are present year-round, but the approach of tax season means that identity thieves will intensify efforts trying to impersonate the IRS and others involved in tax and financial work to get sensitive information.

Identity thieves also use recent news events, including tragedies, to try tricking taxpayers. And in another common tax season scam, identity thieves will pose as new, potential clients to tax professionals by email or over the phone in hopes of obtaining access to company systems. Ultimately, successful attempts to get this information means fraudsters can try filing fake tax returns with a goal of getting a refund.

“Identity thieves are relentless and use a variety of techniques. As Tax Security Awareness Week concludes, we urge people to be careful with their personal information and be wary of email and text scams,” said IRS Commissioner Danny Werfel. “With people anxious to receive the latest information about a refund or other issues during tax season, scammers will regularly pose as the IRS, a state tax agency or others in the tax industry. People should be incredibly wary about unexpected messages that can be an elaborate trap by scam artists, especially during filing season.”

During National Tax Security Awareness Week, now in its eighth year, the Security Summit partnership of the IRS, state tax agencies and the nation’s tax community work to raise awareness among taxpayers, tax professionals and the business community about the importance of safeguarding information to protect against identity theft. The Security Summit formed in 2015 to combat tax-related identity theft through better public-private sector coordination as well as strengthening internal protections in the tax community and raising public awareness about security threats.

With the tax season fast approaching, the Security Summit partners remind taxpayers and others to take extra steps to protect their financial and tax information. As the IRS and the Summit partners have strengthened their internal defenses in recent years to protect against fraud, identity thieves have increasingly focused on more elaborate ways to obtain sensitive taxpayer information in hopes of evading systemic defenses by the IRS and the Summit partners in tax community.

In this final installment of the National Tax Security Week Awareness series, the Summit partners urged taxpayers and tax professionals to be alert to fake communications posing as legitimate organizations in the tax and financial community, including the IRS and states. These messages can arrive in many ways, including an unsolicited text or email to lure unsuspecting victims to provide valuable personal and financial information that can lead to identity theft. These include:

• Phishing is an email sent by fraudsters claiming to come from the IRS or another legitimate organization, including state tax organizations or a financial firm. The email lures the victims into the scam by a variety of ruses such as enticing victims with a phony tax refund or frightening them with false legal/criminal charges for tax fraud.
• Smishing is a text or smartphone SMS message that uses the same technique as phishing. Scammers often use alarming language like, “Your account has now been put on hold,” or “Unusual Activity Report” with a bogus “Solutions” link to restore the recipient’s account. Unexpected tax refunds are another potential target for scam artists.

The IRS initiates most contacts through regular mail, which means taxpayers shouldn’t be getting an unexpected message by email, text or social media regarding a bill or tax refund.

The Summit partners remind taxpayers and others never to click on any unsolicited communication claiming to be the IRS or others because it may surreptitiously load malware. It may also be a way for malicious hackers to load ransomware that keeps the legitimate user from accessing their system and files.

Individuals should never respond to tax-related phishing or smishing or click on the URL link. Instead, the scams should be reported by sending the email or a copy of the text/SMS as an attachment to phishing@irs.gov.

Taxpayers can also report scams to the Treasury Inspector General for Tax Administration or the Internet Crime Complaint Center. The Report Phishing and Online Scams page at IRS.gov provides complete details. The Federal Communications Commission’s Smartphone Security Checker is a useful tool against mobile security threats.

The IRS also warns taxpayers to be wary of messages that appear to be from friends or family but are possibly stolen or compromised email or text accounts from someone they know. This remains a popular way to target individuals and tax preparers for a variety of scams. Individuals should verify the identity of the sender by using another communication method; for instance, calling a number they independently know to be accurate, not the number provided in the email or text.

Signs that a scam may be underway

Taxpayers should watch for a number of tell-tale signs that could be an indication that they have been a victim of identity theft or a tax scam. Among some of the signs are:

• Taxpayers receiving a tax transcript in the mail from the IRS that was not ordered.
• Taxpayers receiving an unrequested Employer Identification Number.
• Taxpayers receiving W-2’s from an unknown employer.
• Taxpayers unexpectedly getting a notice or an email from a tax preparation company that is:
  • Confirming access to an existing online account.
  • Disabling an existing online account.
  • Confirming a new online account.
• Getting a letter from the IRS during a year that the taxpayer didn’t earn income or a tax return hadn’t been filed. In this situation, it’s possible an identity thief has submitted a tax return in the honest taxpayer’s name. In this situation, where the taxpayer didn’t earn money or file a return, the warning sign is a letter showing:
  • Additional tax is owed.
  • A refund was offset because of a balance due.
  • Collection actions have been taken.

Generally, the IRS starts with a mailed paper bill to a person who owes taxes. If a taxpayer wants to verify what taxes they owe the IRS, they should view tax account information. But they should not click on links in email or texts saying they owe a bill.

Protect against becoming a victim, again

Taxpayers who believe they’re victims of tax-related identity theft – and who have not received an IRS letter alerting them to ID theft – should complete Form 14039, Identity Theft AffidavitPDF.

The IRS will work to verify the legitimate taxpayer, clear the fraudulent return from their account and generally place a special marker on the account that will generate an IP PIN each year for the taxpayer who is a confirmed identity theft victim. This ensures that the criminal does not come back in the future claiming to be the victim and trying to commit the fraud yet again.

In most tax-related identity theft cases, there is no need for taxpayers to file Form 14039, Identity Theft AffidavitPDF. That’s because the IRS identifies a suspicious tax return based on hundreds of processing filters and pulls the suspicious return for review. The IRS will send a letter to the taxpayer and will not process the tax return until hearing back from the taxpayer.

Help for taxpayers: Get an IRS Identity Protection PIN

An IP PIN protects a taxpayer’s account, even if they don’t need to file a tax return, by rejecting any e-filed tax return filed not using the unique PIN. New IP PINs are sent automatically from the IRS every year for added security. Once an individual enrolls in the IP PIN program, there is no way to opt-out. To obtain an IP PIN, taxpayers can visit the IRS online tool Get an IP PIN.

Create a personal IRS account online directly with the IRS

Taxpayers can create an IRS Online Account before scammers can use their stolen personal information to create one first. An IRS Online Account usually only takes five to 10 minutes to set up. Once an account is created, scammers can’t create a fraudulent one for the same person.

Reporting scams and tax fraud

Taxpayers should report suspicious IRS, Treasury or tax-related online or email phishing scams to phishing@irs.gov. They should not click on any links, open attachments or reply to the sender.

If taxpayers receive an IRS-related phone call, but do not owe taxes, they should hang up immediately and contact the Treasury Inspector General for Tax Administration to report the IRS impersonation scam call. The caller ID and callback number can be reported to phishing@irs.gov with the subject line of “IRS Phone Scam.”

Source: IRS-2023-229, Dec. 1, 2023

The Department of the Treasury and the Internal Revenue Service today issued two items of guidance on the excluded entity restriction of the section 30D clean vehicle credit, as amended by the Inflation Reduction Act. Under the excluded entity restriction, vehicles are not eligible for the clean vehicle credit if the battery contains battery components manufactured or assembled or applicable critical minerals extracted, processed or recycled by a foreign entity of concern (FEOC).

The proposed regulations provide definitions and proposed rules for qualified manufacturers of vehicles to determine eligibility for the clean vehicle credit regarding the excluded entity restrictions. In particular, the proposed regulations provide rules for determining whether applicable critical minerals (and their associated constituent materials) and battery components are FEOC compliant, meaning such materials do not violate the excluded entity provision.

Revenue Procedure 2023-38PDF provides procedural rules for qualified manufacturers of new clean vehicles to comply with the reporting, certification, and attestation requirements regarding the excluded entity restriction, under which the IRS, with analytical assistance from the Department of Energy, will review compliance with the excluded entity restrictions. In addition, this revenue procedure updates and consolidates the procedural rules for qualified manufacturers with respect to the clean vehicle credit, the previously-owned clean vehicle credit, and the qualified commercial clean vehicle credit.

Excluded Entity Restrictions

Section 30D provides a credit for new clean vehicles that are placed in service by the taxpayer during the taxable year, worth a maximum credit of $7,500 per vehicle, consisting of $3,750 if certain critical minerals requirements are met and $3,750 if certain battery components requirements are met.

Under the excluded entity restriction, in order to be eligible for the section 30D credit, vehicles placed in service beginning in 2024 must not have batteries containing battery components manufactured or assembled by a FEOC. In addition, vehicles placed in service beginning in 2025 must have not batteries containing applicable critical minerals extracted, processed, or recycled by a FEOC.

The proposed regulations regarding the section 30D credit incorporate the statutory definition of FEOC from the IIJA, which is administered by the Department of Energy (DOE), as well as implementing guidance promulgated by the DOE. In addition, the proposed regulations provide due diligence requirements for qualified manufacturers; specific rules for the determination of when applicable critical minerals (and associated constituent materials), battery components, battery cells, and batteries are compliant with the FEOC rules; a regime for review of FEOC-compliance determinations; and penalty rules.

For more information about tax benefits from the Inflation Reduction Act, go to Inflation Reduction Act of 2022.

Source: IRS-2023-228, Dec. 1, 2023

The Internal Revenue Service reminds low- and moderate-income taxpayers that they can save for retirement now and possibly earn a special tax credit in 2024 and years ahead.

The Retirement Savings Contributions Credit, also known as the Saver’s Credit, helps offset part of the first $2,000 workers voluntarily contribute to Individual Retirement Arrangements (IRAs), 401(k) plans and similar workplace retirement programs. The credit also helps any eligible person with a disability who is the designated beneficiary of an Achieving a Better Life Experience (ABLE) account and makes a contribution to that account. For more information about ABLE accounts, see Publication 907, Tax Highlights for Persons With Disabilities.

The maximum Saver’s Credit is $1,000 ($2,000 for married couples). The credit can increase a taxpayer’s refund or reduce the tax owed but is affected by other deductions and credits. Distributions from a retirement plan or ABLE account reduce the contribution amount used to figure the credit.

Contribution deadlines

Individuals with IRAs have until April 15, 2024 – the due date for filing their 2023 return – to set up a new IRA or add money to an existing IRA for 2023. Both Roth and traditional IRAs qualify.

Individuals with workplace retirement plans still have time to make qualifying retirement contributions and get the Saver’s Credit on their 2023 tax return. Elective deferrals (contributions) to workplace retirement plans must be made by December 31 to a:

• 401(k) plan.
• 403(b) plan for employees of public schools and certain tax-exempt organizations.
• Governmental 457 plan for state or local government employees.
• Thrift Savings Plan (TSP) for federal employees.

See the instructions to Form 8880, Credit for Qualified Retirement Savings Contributions, for a list of qualifying workplace retirement plans and additional details.

Eligibility

To be eligible, taxpayers must be 18 years of age and older, not claimed as a dependent and not a full-time student. The Saver’s Credit has income limits based on a taxpayer’s adjusted gross income and their marital or filing status.

2023 income limits are:

• Married couples filing jointly with adjusted gross incomes up to $73,000.
• Heads of household with adjusted gross incomes up to $54,750.
• Married individuals filing separately and singles with adjusted gross incomes up to $36,500.

Taxpayers can use the Interactive Tax Assistant tool for the Saver’s Credit to determine their eligibility.

Visit the Saver’s Credit page on IRS.gov to learn about rules, contribution rates and credit limits.

Source: IRS-2023-222, Nov. 22, 2023

Following feedback from taxpayers, tax professionals and payment processors and to reduce taxpayer confusion, the Internal Revenue Service today released Notice 2023-74PDF announcing a delay of the new $600 Form 1099-K reporting threshold for third party settlement organizations for calendar year 2023.

As the IRS continues to work to implement the new law, the agency will treat 2023 as an additional transition year. This will reduce the potential confusion caused by the distribution of an estimated 44 million Forms 1099-K sent to many taxpayers who wouldn’t expect one and may not have a tax obligation. As a result, reporting will not be required unless the taxpayer receives over $20,000 and has more than 200 transactions in 2023.

Given the complexity of the new provision, the large number of individual taxpayers affected and the need for stakeholders to have certainty with enough lead time, the IRS is planning for a threshold of $5,000 for tax year 2024 as part of a phase-in to implement the $600 reporting threshold enacted under the American Rescue Plan (ARP).

Following feedback from the tax community, the IRS is also looking to make updates to the Form 1040 and related schedules for 2024 that would make the reporting process easier for taxpayers. Changes to the Form 1040 series – the core tax form for more than 150 million taxpayers – are complex and take time; delaying changes to tax year 2024 allows for additional feedback.

“We spent many months gathering feedback from third party groups and others, and it became increasingly clear we need additional time to effectively implement the new reporting requirements,” said IRS Commissioner Danny Werfel. “Taking this phased-in approach is the right thing to do for the purposes of tax administration, and it prevents unnecessary confusion as we continue to look at changes to the Form 1040. It’s clear that an additional delay for tax year 2023 will avoid problems for taxpayers, tax professionals and others in this area.”

The ARP required third party settlement organizations (TPSOs), which include popular payment apps and online marketplaces, to report payments of more than $600 for the sale of goods and services on a Form 1099-K starting in 2022. These forms would go to the IRS and to taxpayers and would help taxpayers fill out their tax returns. Before the ARP, the reporting requirement applied only to the sale of goods and services involving more than 200 transactions per year totaling over $20,000.

The IRS temporarily delayed the new requirement last year.

Reporting requirements do not apply to personal transactions such as birthday or holiday gifts, sharing the cost of a car ride or meal, or paying a family member or another for a household bill. These payments are not taxable and should not be reported on Form 1099-K.

However, the casual sale of goods and services, including selling used personal items like clothing, furniture and other household items for a loss, could generate a Form 1099-K for many people, even if the seller has no tax liability from those sales.

This complexity in distinguishing between these types of transactions factored into the IRS decision to delay the reporting requirements an additional year and to plan for a threshold of $5,000 for 2024 in order to phase in implementation. The IRS invites feedback on the threshold of $5,000 for tax year 2024 and other elements of the reporting requirement, including how best to focus reporting on taxable transactions.

“The IRS will use this additional time to continue carefully crafting a way forward to minimize burden,” Werfel said. “We want to make this as easy as possible for taxpayers. We will work to make the new reporting requirements easier for them, and we’ll work closely with third party groups, tax professionals and others to find the smoothest path to ensure compliance with the law. This is consistent with our Strategic Operating Plan. The IRS is focused on meeting taxpayers where they are and helping them get it right the first time.”

Expanded information reporting, which will occur as the result of the change in thresholds for Form 1099-K, is important because it increases tax compliance and can reduce burden on taxpayers seeking to follow the law. The IRS believes that expansion must be managed carefully to help ensure that Forms 1099-K are issued only to taxpayers who should receive them. In addition, it’s important that taxpayers understand what to do as a result of this reporting, and that tax professionals and software providers have the information they need to assist taxpayers.

Source: IRS-2023-221, Nov. 21, 2023

WASHINGTON — The Department of the Treasury and the Internal Revenue Service today issued proposed regulationsupdating rules for the investment tax credit under section 48 (ITC) that have been unchanged since 1987. The proposed rules update the types of energy properties eligible for the section 48 ITC, reflecting changes in the energy industry, technological advances, and updates from the Inflation Reduction Act of 2022 (IRA).

Energy industry participants will appreciate that the proposed regulations provide definitions of energy properties for which the ITC was available before the IRA. These include, but are not limited to, solar process heat, fiber-optic solar property, combined heat and power system property, qualified fuel cell property, and qualified microturbine property.

These proposed regulations also address technologies that were added to the ITC as energy property by the IRA, including electrochromic glass, energy storage technology, microgrid controllers, and biogas property. Importantly, the IRA added new provisions to the ITC to allow smaller projects to include the cost of certain types of interconnection property in their credit amount.

Additionally, the proposed regulations provide general rules for the ITC including the application of the “80/20” Rule to retrofitted energy property, dual use property, and issues related to multiple owners of an energy property.

Additional information about guidance issued under the IRA is available at Inflation Reduction Act of 2022.

Source: IRS-2023-220, Nov. 17, 2023

The Internal Revenue Service today announced the annual inflation adjustments for more than 60 tax provisions for tax year 2024, including the tax rate schedules and other tax changes. Revenue Procedure 2023-34PDF provides detailed information about these annual adjustments.

New for 2024

Starting in calendar year 2023, the Inflation Reduction Act reinstates the Hazardous Substance Superfund financing rate for crude oil received at U.S. refineries, and petroleum products that entered into the United States for consumption, use, or warehousing. The tax rate is the sum of the Hazardous Substance Superfund rate and the Oil Spill Liability Trust Fund financing rate. For calendar years beginning in 2024, the Hazardous Substance Superfund financing rate is adjusted for inflation. For calendar year 2024 crude oil or petroleum products entered after

Dec. 31, 2016, will have a tax rate of $0.26 cents a barrel.

Highlights of changes in Revenue Procedure 2023-34:

The tax year 2024 adjustments described below generally apply to income tax returns filed in 2025. The tax items for tax year 2024 of greatest interest to most taxpayers include the following dollar amounts:

• The standard deduction for married couples filing jointly for tax year 2024 rises to $29,200, an increase of $1,500 from tax year 2023. For single taxpayers and married individuals filing separately, the standard deduction rises to $14,600 for 2024, an increase of $750 from 2023; and for heads of households, the standard deduction will be $21,900 for tax year 2024, an increase of $1,100 from the amount for tax year 2023.
• Marginal rates: For tax year 2024, the top tax rate remains 37% for individual single taxpayers with incomes greater than $609,350 ($731,200 for married couples filing jointly).The other rates are:

  35% for incomes over $243,725 ($487,450 for married couples filing jointly)
  32% for incomes over $191,950 ($383,900 for married couples filing jointly)
  24% for incomes over $100,525 ($201,050 for married couples filing jointly)
  22% for incomes over $47,150 ($94,300 for married couples filing jointly)
  12% for incomes over $11,600 ($23,200 for married couples filing jointly)

  The lowest rate is 10% for incomes of single individuals with incomes of $11,600 or less ($23,200 for married couples filing jointly).

• The Alternative Minimum Tax exemption amount for tax year 2024 is $85,700 and begins to phase out at $609,350 ($133,300 for married couples filing jointly for whom the exemption begins to phase out at $1,218,700). For comparison, the 2023 exemption amount was $81,300 and began to phase out at $578,150 ($126,500 for married couples filing jointly for whom the exemption began to phase out at $1,156,300).
• The tax year 2024 maximum Earned Income Tax Credit amount is $7,830 for qualifying taxpayers who have three or more qualifying children, an increase of from $7,430 for tax year 2023. The revenue procedure contains a table providing maximum EITC amount for other categories, income thresholds and phase-outs.
• For tax year 2024, the monthly limitation for the qualified transportation fringe benefit and the monthly limitation for qualified parking increases to $315, an increase of $15 from the limit for 2023.
• For the taxable years beginning in 2024, the dollar limitation for employee salary reductions for contributions to health flexible spending arrangements increases to $3,200. For cafeteria plans that permit the carryover of unused amounts, the maximum carryover amount is $640, an increase of $30 from taxable years beginning in 2023.
• For tax year 2024, participants who have self-only coverage in a Medical Savings Account, the plan must have an annual deductible that is not less than $2,800, an increase of $150 from tax year 2023, but not more than $4,150, an increase of $200 from tax year 2023. For self-only coverage, the maximum out-of-pocket expense amount is $5,550, an increase of $250 from 2023. For tax year 2024, for family coverage, the annual deductible is not less than $5,550, an increase of $200 from tax year 2023; however, the deductible cannot be more than $8,350, an increase of $450 versus the limit for tax year 2023. For family coverage, the out-of-pocket expense limit is $10,200 for tax year 2024, an increase of $550 from tax year 2023.
• For tax year 2024, the foreign earned income exclusion is $126,500, increased from $120,000 for tax year 2023.
• Estates of decedents who die during 2024 have a basic exclusion amount of $13,610,000, increased from $12,920,000 for estates of decedents who died in 2023.
• The annual exclusion for gifts increases to $18,000 for calendar year 2024, increased from $17,000 for calendar year 2023.
• The maximum credit allowed for adoptions for tax year 2024 is the amount of qualified adoption expenses up to $16,810, increased from $15,950 for 2023.

Items unaffected by indexing:

By statute, certain items that were indexed for inflation in the past are currently not adjusted.

• The personal exemption for tax year 2024 remains at 0, as it was for 2023. This elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act.
• For 2024, as in 2023, 2022, 2021, 2020, 2019 and 2018, there is no limitation on itemized deductions, as that limitation was eliminated by the Tax Cuts and Jobs Act.
• The modified adjusted gross income amount used by taxpayers to determine the reduction in the Lifetime Learning Credit provided in § 25A(d)(2) is not adjusted for inflation for taxable years beginning after Dec. 31, 2020. The Lifetime Learning Credit is phased out for taxpayers with modified adjusted gross income in excess of $80,000 ($160,000 for joint returns).

Source: IRS-2023-208, Nov. 9, 2023

With 2023 rapidly coming to a close, the Internal Revenue Service today encouraged taxpayers to review their tax withholding as soon as possible to avoid a potential surprise when they file their tax return next year.

Although it’s best for taxpayers to verify withholding early in the year, an adjustment made in the final weeks of 2023 could still help to avoid an unexpected result, such as a big refund or a balance due, when filing taxes next year.

With only a few weeks left in the year, the IRS encouraged people who haven’t checked their withholding recently to do it soon so they can make any withholding adjustments needed. The IRS has several ways to help.

Tax Withholding Estimator

The Tax Withholding Estimator, also available in Spanish, can help taxpayers determine if they have too much income tax withheld and how to adjust tax withholding. In other cases, it can help taxpayers see that they should withhold more or make an estimated tax payment to avoid a tax bill when they file their 2023 tax return.

The tool offers workers, retirees, self-employed individuals and other taxpayers a simple-to-use, mobile-friendly way to calculate the correct amount of income tax they should have withheld from wages and pension payments based on their complete set of facts and circumstances.

Taxpayer options to pay as they go

Taxes are generally paid throughout the year. Employers typically withhold income tax from their employees’ salary and pay it to the IRS on the employee’s behalf. However, about 70% of taxpayers withhold too much every year resulting in a refund.

The IRS reminds individuals earning income that’s not subject to withholding, such as income from rental properties, gig economy work or self-employment, to consider making quarterly estimated tax payments to avoid a balance due or penalties when filing.

Taxpayers may send estimated tax payments with Form 1040-ES by mail, or pay online, by phone or from their mobile device using the IRS2Go app. Taxpayers may also make estimated tax payments through their Online Account, where they can also see their payment histories and other tax records. To create an Online Account, go to IRS.gov/account.

Other items may affect 2023 taxes

Common and unforeseen life events can be a trigger to make withholding adjustments. They include:

• Life changes such as marriage or childbirth – Getting married or having a child are just a couple of life events that can affect a taxpayer’s refund or how much they owe.

• Job Loss – IRS Publication 4128, Tax Impact of Job LossPDF explains how this unfortunate circumstance can create new tax issues, such as receiving unemployment compensation.

• Disasters such as wildfires and hurricanes – Special tax law provisions may help taxpayers and businesses recover financially from the impact of a disaster, especially when the federal government declares their location a major disaster area.

The IRS reminds taxpayers that a refund is not guaranteed. Proper withholding adjustments help people boost take-home pay rather than be over-withheld and get it back as a tax refund.

If eligible, the fastest way to receive a tax refund is by filing electronically and choosing Direct Deposit. IRS issues most refunds within 21 days. While most are issued in 21 days or less from an error-free and paperless tax return, many take longer for different reasons.

Source: IRS-2023-205, Nov. 3, 2023